Archive for the ‘Colombia FTA’ Category

I have long argued that the Democrats have gotten it wrong on Colombia, by parroting the misinformation about this country and its President, Alvaro Uribe, circulated by US labor unions intent on stopping a free trade agreement between two staunch allies. This is one of those examples political scientists tout of a well-financed interest group successfully killing a policy that would be to the benefit of a broad majority of Americans.

Alvaro Uribe has warts, true, not least of which include his striking similarity to New York City mayors, such as Bloomberg and Giuliani. All three have sought to avoid term limits to the chagrin of some and the delight of others. But, Uribe, like these New York City mayors, has improved the quality of life of his citizens and should be commended and supported for this, no matter what your position is on term limits. He should in no way be vilified, as uninformed liberals in America have been prone to do. The latter included candidate Obama in a presidential debate, who merely parrotted the misinformation that appears on the AFL-CIO web site.

I apologize for what may seem like hyperbolic language, but it is one of those issues in which so many have just gotten it wrong. It is important to have some straight talk on the matter and to staunch the circulation of lies. Ask someone you know from Latin America about Alvaro Uribe. I wrote about this issue a while back in a post. Have a read…

Today, I want to draw your attention to a fair appraisal of Uribe and Colombia that appeared in the pages of Economist in early January. First, is the leader, followed by a fuller article. Enjoy reading and learning…

Latin America is not usually high on the list of hotspots for geopolitical analysts. Yet Hugo Chavez is threatening war against neighboring Colombia. (See the note below from a JPMorgan publication today.) Venezuelan President Chavez is America’s nemesis in the hemisphere, and Venezuela shares a long border with Colombia in the north of South America, facing the Caribbean. The word is that Chavez is on friendly (financial) terms with the FARC, the murderous, drug-dealing insurgency that has plagued Colombian society for decades. Yet Venezuela and Colombia are also important trading partners, though this trade has suffered amid recent tensions. Chavez doesn’t like the close military ties Colombia has fostered with the United States, quietly intensified by the Obama administration earlier this year. Meanwhile Chavez buys arms from US global competitor, Russia. Conflict in Latin America has been rare in recent years, though there was a cross-border flare-up in early 2008 between Colombia and Ecuador, currently led by Chavez’s nationalistic ally, Rafael Correa, who won a second term earlier this year. Apparently Correa allowed the FARC to operate across the border from Colombia, prompting the government of Alvaro Uribe to launch a raid against a FARC camp in Ecuador.

Like Iran in the Persian Gulf, Venezuela wishes to be a regional power countering local U.S. allies, wielding its oil wealth to make arms purchases. The best the U.S. could do to counter Venezuela’s threats is to move ahead with the Colombian free trade agreement, pushed aggressively by George W. Bush and scuttled by Democrats in Congress, including then Senator Barack Obama. See a note on this I penned a year and a half ago. President Bush openly talked about America’s strong alliance with Colombia. It might be worthwhile for President Obama to do the same.

During the Great Depression, international trade contracted by a third, as countries around the world erected barriers to trade, aggravating a sharp decline in output already under way and throwing millions out of work. Thus far, in the Great Recession of 2008-09, the end of which some observers may have called too soon, the major powers have avoided trade protection. Enter the Obama administration.

Last year, I published a piece calling for those supporting Democrats in America’s national elections to make sure they keep the Dems honest on trade. Concerns about Obama’s commitment to free trade, due to his campaign strategy in Midwestern states last year, were dismissed as mere election-year politics. His commitment to satisfying his friends in America’s trade unions is now abundantly clear, not only because he parrots their unfair accusations about abuses by the Colombian government, but also in the latest action by the Obama administration to raise tariffs against Chinese tires (see NYT imes article).

Trade wars can spiral out of control, even if this is not the original intention of protectionists. During the 19th century, Britain, the unrivaled power at the time, ensured global prosperity through its commitment to free trade. The U.S. since 1945 has played this role, through both Democratic and Republican administrations. Doubts about President Obama’s commitment to free trade, a key pillar of international cooperation and a key strategy for broad-based global prosperity, have re-emerged, a point quite ably discussed in this Economist article.

Are the Democrats hypocrites on Colombia and on Free Trade? With Obama in tow, last year they killed the Colombia FTA legislation promoted by President George W. Bush (I know you don’t like him), who really got it right on hemispheric free trade and on U.S. ally Colombia. The Dems whined about abuses by the government of Alvaro Uribe, who has in fact made great strides in ending Colombia’s nasty guerrilla war. Read posts I wrote in the past on Colombia and on trade.

Now, President Obama, who has adopted many of the policies he savaged when they were Bush’s (e.g. targeted killings in Afghanistan to name one) is backing greater U.S.-Colombia military ties, which had already been deepened under Mr. Bush. So, much so that Obama’s erstwhile buddy, Chavez, whom he shmoozed with earlier this year, refuses to normalize relations with his neighbor to the west. Yet Obama cannot so easily backtrack on his wrong-headed kaybashing of Colombia FTA, based on the AFL-CIO’s trumped up charges of abuse against the Uribe government.

An Economist article discusses the growing presence of Great Powers, especially China, in Latin America, flouting nearly two centuries of U.S. dominance in the region, since the articulation of the Monroe Doctrine in the early 1820s. In the near term, this worry is overdone. Longer-term, if the U.S. continues to damage its sovereign creditworthiness, i.e. by not putting in place a medium-term fiscal consolidation program (that is, to reduce America’s rising government debt) — a program that should include putting health care reform on hold, then America’s relative decline will accelerate and this will affect its projection of power in the Western Hemisphere.

In the 1820s, as revolution in Spain led to unrest in its colonies in the Western Hemisphere, the Holy Alliance of autocratic east European courts — Russia, Austria and Prussia, threatened to intervene in these colonies. President Monroe in 1823, backed by the British Navy, warned Europe that any extension of European power to the Western Hemisphere would be “dangerous to our [U.S.] peace and safety.”

Nowadays, as the world moves increasingly toward a multipolar system, power projection in Latin America is largely in the form of commerce. China, India and others seek, above all, the region’s raw materials to fuel their rising economies. True, with economic influence comes political influence. True as well, such powers as Russia and Iran seek direct political influence through arms sales and energy deals with the likes of Chavez’s Venezuela, Cuba, and Evo Morales’s Bolivia. But these countries are on the fringe. More of interest to U.S. policymakers are China’s economic relations with the major economies of the region, notably Brazil. China’s economic relations with Brazil have been hand in glove — raw materials fueling a manufacturing juggernaut, while with Mexico, they have been competitive. Brazil is also a manufacturing nation and will one day find China an unwelcome competitor.

So, the thrust of the foreign “intervention” is commercial and good for Latin America. This is good for the United States as well, insofar as China supports growth in the region and the U.S. no longer has to be relied on so heavily as the source of demand and investment for the hemisphere. In previous U.S. downturns, Latin countries hovered on the brink of default (or in fact defaulted), whereas this crisis they have weathered, due in part to demand from China and elsewhere.

China, for its part, is “intervening” in Latin America as a rule-abiding member of the global capitalist system, wrought by the U.S. and its allies. This should not worry American policymakers. Sure, they should keep an eye on the mischief-making of countries like Iran and Russia that seek to upset the U.S. in its own backyard, much as Krushchev did with Cuba in the middle of the last century (however less dramatic and threatening the current mischief-making is). Again, the smartest thing U.S. policymakers can do is get America’s fiscal house in order — by first of all, postponing health care reform — and revive the formidable U.S. economy — upon which the country’s power projection is based — not least through continued banking overhaul, workout of real estate loans, policies to increase household savings, and a reform of monetary policy (by discarding Greenspan’s discredited approach).

Moody’s analyst Gabriel Torres penned a nice report on the impact of the global financial crisis on the 27 sovereign nations his firm assigns credit ratings to in Latin America and the Caribbean (email me for a copy — roger.scher@gmail.com). He joined two of his colleagues in an informative conference call today to discuss the report and respond to investors’ questions. Moody’s takes a relatively benign view of the impact of the global financial crisis in the region, though the global rating agency believes Mexico, due to its integration with the US economy and its structural weaknesses, remains most vulnerable to deterioration and a possible downgrade.

Torres outlined four channels by which emerging market countries are affected by the global crisis: remittances (cash sent home by nationals working overseas), exports, capital inflows, and commodity prices. While countries in the region have been negatively impacted through all four channels, Mexico has been hit hardest. Most other countries, notably Brazil and Peru, have been in a relatively strong position to sustain the shocks. Ironically, Latin America is best-prepared for the planet’s worse financial crisis in years (with generally high levels of foreign exchange reserves, reaped during the boom in commodity prices earlier this decade). Rising interest rates and recession in the developed world in the eighties and nineties toppled many Latin countries; however, the strides made in improving public finances, floating exchange rates, and cleaning up banks have made America’s partners in the western hemisphere more resilient to handle this crisis. Of note was the point Torres made that, if their benign view is wrong over the next 18 months, it will be because of problems in the banks that are not apparent today.

Moody’s reports that, since the onset of the crisis, Latin American and Caribbean sovereigns sustained negative rating actions in only 5 out of 27 cases, versus 12 out of 21 in Eastern Europe. Similar trends can be found at the other major rating agencies (S&P and Fitch). See Moody’s Sovereign Ratings. This is partly due to the fact that the rating agencies may have over-rated Eastern Europe (brushing aside gaping current account deficits because they were financed by FDI) and under-rated Latin America (over-weighting the region’s poor credit history and discounting its burgeoning fx reserves).

Finally, ratings are notoriously sticky. This has been part of the criticism leveled at the agencies for rating real estate transactions too high (some of them AAA). Because of all the notches in the ratings scale and the inability to take a binary or at least a less “granular” view of risks, agency analysts have a hard time changing a view dramatically on a country (or any other credit) in a short time frame. In short, the rating agencies are not nimble. They are prisoners of their ratings scale. See an Economist article on the agencies and a Reuters article on Goldman’s new product that bypasses credit ratings.

Hence, although Mexico is on a deteriorating trend — it is running out of oil, which represents about a third of government revenue, and politicians won’t liberalize the energy sector or widen the tax base — and Brazil is on an improving trend — it has become a net oil exporter and has very strong fx reserves, the former is rated Baa1, fully three notches above the latter, at Ba1. Rapid downgrades and rapid upgrades are not possible at a rating agency – until, of course, it is too late — because what does that mean? It means the analyst was wrong.

Interamerican Development Bank 50th Anniversary Meeting in Colombia last month

The Summit of the Americas in Port of Spain, Trinidad included the much-publicized American initiative to open up to Cuba. President Obama continued to present his new, more acceptable face of America, put forth with grace since his inauguration in January. He even unleashed his charm offensive against Venezuela’s irascible and mercurial Hugo Chavez, joking and smiling with him for the cameras, united perhaps in their unrelenting criticism of Obama’s predecessor, though Obama never quite used the term “el diablo.”

Yet the less-publicized hemispheric meeting took place at the end of March in Medellin, Colombia, the occasion of the 50th anniversary meeting of the Board of Governors of the Interamerican Development Bank (the IDB or BID, according to its Spanish or Portuguese acronym), the regional multilateral lender that comprises 48 countries, 27 Latin American and Caribbean nations that borrow, and the rest, including the U.S., Asian and European countries, that lend.

At a dinner I attended a few weeks ago, a young professional working at an international NGO launched into a tirade against the Colombian government, calling it fascist.This is the sort of hostility to the government of Alvaro Uribe that has enabled the Democratic Party to oppose a free trade agreement with that country, which died in Congress last week.The failure of this legislation could throw millions of poor Colombians out of work, yet the Democrats claim they are standing up for human rights, when in fact they are merely protecting the privileges of a narrow segment of American workers in an election year.

Unlike the callow woman I dined with, the Democratic Party does not have the excuse of youth (unless of course it insists on choosing youthful leadership).The Democratic Party has been the party of the less fortunate since the days of FDR.FDR internationalized support for the downtrodden with his famous four freedoms speech, in which he sought to guarantee all citizens of the planet freedom of expression and worship, freedom from fear, and “freedom from want — which, translated into world terms, means economic understandings which will secure to every nation a healthy peacetime life for its inhabitants — everywhere in the world.”

FDR’s program of reducing trade barriers and Truman’s Marshall Plan to aid the war-ravaged economies of Europe led logically to JFK’s efforts to raise millions out of poverty, with such programs as the Alliance for Progress for Latin America, the Peace Corps, and the Kennedy round trade talks to reduce barriers to trade worldwide.

Bill Clinton deepened this commitment with the NAFTA free trade agreement, which brought tens of millions of Mexicans into the global trading system and enabled the US, Mexico and Canada to specialize in production for the mutual benefit of citizens in all three nations.Likewise, the Clinton administration helped bring China into the World Trade Organization, raising the living standards of some 300 million Chinese who work in factories along the eastern seaboard of that giant country.Since 1994, a number of countries have secured FTAs with the U.S., including Mexico, Canada, Central American countries, Peru, Chile, Israel and Jordan.As a result, they have gotten access to our market, investment in their economies and job growth, and we have gotten lower-cost products and markets for our products.A win-win situation.

However, over the last several years, Democrats have become opposed to free trade, and by extension, to helping the poor of the world.Last week, the Democratic-controlled House of Representatives, when presented with the Free Trade Agreement with Colombia, voted for the first time since the 1970s to deny the president “fast track” trade authority to push the deal through.Hillary Clinton let her campaign manager go because his P.R. firm had a discussion with the Colombian ambassador over trade.The Democratic presidential candidates have promised to scrap NAFTA and to staunch trade liberalization, in order to win votes in places like Ohio and Pennsylvania, where certain industries have declined as our economy has been transformed from one based on manufacturing to one based on knowledge.Furthermore, a few years ago, but for the heavy lobbying of President Bush, CAFTA, the free trade agreement with the impoverished nations of Central America and the Caribbean, would have failed.

The Democrats are experiencing cognitive dissonance.They don’t want to oppose trade and they don’t want to be seen as protecting the privileges of the few.So, they come up with a nifty construct: we’re not against free trade; we’re for “fair trade.”They propose attaching labor and environmental riders to the free trade agreements in order to protect the poor from abuse and pollution.In principle, it’s not a bad argument.But it’s pure politics, rather than sound policy. A trade agreement is not the place to pressure foreign governments on labor and environmental standards. That should be done in other accords or treaties.

By attaching labor and environmental riders, investment will be discouraged and jobs lost.Tell a Guatemalan man, with a family of four to feed, that you are attaching labor protection to an agreement so that he will work shorter hours, and environmental protection to keep his air clean.Such statutory protections do him and his family little good if his job disappears.It is no accident that almost everyone across the board in Latin America supports free trade agreements with the U.S., without the Democratic riders.The only ones who oppose them, by and large, are in protected industries, such as state-owned telecoms and agriculture, which would have to compete with American firms.

Further, the Democratic Party argues this election year that its leaders will correct Bush’s heavy-handed relations with the rest of the world. The hypocrisy here is that by halting the progress of free trade, the Democrats will do more harm to U.S. relations with friendly nations than George W. Bush has done with two wars and a lot of swagger.Witness the worried comments by Canadian and Mexican officials in the run-up to the Democratic primary in Ohio.

For all the pain experienced in the rust belt due to inevitable economic adjustment, there has been gain in border areas trading with Mexico and Canada and in the knowledge-based industries located all across the country.This includes Wisconsin, which, though in the Midwest and having lost manufacturing jobs, has also gained knowledge-based jobs due to its superior universities.Americans’ famous flexibility of movement, such as when dust bowl migrants from the South moved north to get manufacturing jobs in the last century, continues today.The inevitable should not be stalled through trade protection, making our nation poorer.Sure, we should soften the blow of adjustment through job training and out-placement services and an adequate social safety net.

Back to Colombia.My young friend with whom I dined was badly mistaken about that country and its government.She was not alone.The AFL-CIO blog on Colombia has been rabid, almost suggesting that the Colombian government itself has been complicit in the murder of trade unionists, a baseless assertion — and character assassination — made simply to protect a few assembly line jobs.A lot of trade unionists have been murdered in Colombia, but so have a lot of people from many walks of life.It is the most violent place in our hemisphere. That’s because there is a civil war going on, largely caused by the guerrilla groups that the government is fighting.

From the time I began working on Colombia in 1994, the principal weakness of that country in my mind has been the inability of the central government to control its territory.As the entity that should exercise sole police power in a country, the central government fails to provide one of its basic functions if armed guerrilla groups roam freely as they do in Colombia.A succession of Colombian governments have been unable to discharge this basic public service.It has in large part been due to Colombia’s terrain, a mountainous country of remote, disconnected communities.As a result, vicious, leftist, drug-dealing guerrilla groups have flourished, and a succession of weak presidents have been unable to contain them.This has resulted in violence, narcotics dealing and poverty.Commercial life has been sharply restricted, as road travel has been limited and dangerous.

I had lunch once with Alvaro Uribe, the president of Colombia.He has an authoritarian personality and is far from perfect.Yet he is a democrat (small d), won a landslide victory for a second term in 2006, and maintains very high approval ratings in Colombia.This is because he has done more to reduce violence, encourage commerce, contain the guerrillas, and disarm the right-wing paramilitaries than any previous president. Not to mention his sound economic reforms and an opening up of the oil sector to investment.The latter has resulted in new discoveries, which will provide the U.S. with energy security from an ally that shares a long border with the much-less-friendly, oil-rich Venezuela. Surely, such a reliable ally deserves a free trade agreement.

Colombia’s right-wing paramilitaries proliferated in remote regions precisely because of the inaction of previous governments against the guerrillas.Although some in the Uribe administration have been tainted by the paramilitaries, more paramilitary soldiers have been demobilized under Uribe than before.Yet the guerrillas continue to hold vast swathes of territory and hundreds of hostages, many of them tortured and chained to trees, and continue to ply the drug trade.In spite of this, Uribe has asserted central government control over more territory than his predecessors, freeing up highways to legitimate commerce.

Thus, it is no accident that most Latin Americans you speak to, not to mention Colombians, many of whom are liberal opponents of George W. Bush, supporters of Barack Obama, and broadly speaking, sympathetic to the Democrats, are miffed by the Democratic opposition to free trade with Colombia. And, they smell the hypocrisy, as the Democrats claim to be standing up for human rights and against the ravages of modern capitalism, when their real intent is to win the votes of working class Americans in the rust belt and get a Democrat back in the White House.At least the late Senator Daniel Patrick Moynihan, Democrat of New York, explained his opposition to NAFTA in simple, honest terms: that he owed a lot to the unions who helped him get elected.

Have a look at the NYTimes article below about Colombians protesting abductions by FARC, a guerrilla group there. There is a lot of misinformation on Colombia in the United States these days that has prevented a much-needed Free Trade Agreement between the US and that country from being passed. A similar FTA with Peru was passed late last year in spite of widespread opposition in Congress, especially from Democrats. The Colombian FTA has been held up due to complaints about the human rights record of Colombian President Uribe’s government in its fight against two vicious guerrilla movements there. I believe that President Uribe has done a fine job improving security and reducing the threat from these guerrilla groups (as well as improving economic policies), and that accusations of complicity of people in his government with human rights abuses of paramilitaries are overblown. In fact, most of the paramilitaries have been disbanded. The latter issue has become an excuse to scuttle the much-needed US-Colombian FTA, which if not passed, will harm job growth for poor people in that country and US-Colombian economic and diplomatic relations.

New York Times article from today:

By JENNY CAROLINA GONZÁLEZ and SIMON ROMERO

BOGOTÁ, Colombia — Hundreds of thousands of demonstrators marched here and in other cities around Colombia on Monday to protest the abductions and killings carried out by the country’s largest rebel group.

The marches, which also took place on a smaller scale in foreign cities from New York to Tokyo, were a vivid display of growing outrage in relation to the rebel group, the Revolutionary Armed Forces of Colombia, known as the FARC. Demonstrators also criticized President Hugo Chávez of Venezuela for his plea to remove the FARC from lists of terrorist groups.

“The FARC made themselves into criminals a long time ago,” said Martín Orozco, 32, a surgeon who marched to the Plaza Bolívar downtown here to voice chants like “No more FARC!” and “We want peace and liberation!” “We are simply tired of this,” he said.

Until several months ago, such a mass gathering against the FARC would have been improbable in this country. Large cities like Bogotá and Medellín had been largely pacified in recent years, with war still raging in parts of the countryside, and the FARC and other guerrillas groups had become less of a pressing concern as the economy boomed.

But then 11 lawmakers held by the FARC were shot to death in a jungle camp last June. And Mr. Chávez’s efforts to win the release of dozens of other hostages held by FARC changed things. President Álvaro Uribe of Colombia withdrew his support for Mr. Chávez’s mediating role last November, triggering a political dispute that has intensified in recent weeks.

The FARC released just two high-profile hostages last month and was found to be lying about the whereabouts of a 3-year-old boy born into captivity, discovered living in foster care here and not in jungle camps. Shortly after the release of the two hostages, Mr. Chávez called on the FARC to be seen as a “real army” and not terrorists.

That assessment did not sit well with many Colombians already upset with delays in releasing hostages. A group venting their rage at the FARC on Facebook, an Internet social-networking site, had formed in early January before Mr. Chávez’s comments. It organized Monday’s marches, gaining the support of Mr. Uribe’s government.

“The Colombian people were lethargic, with an almost cynical indifference to the problems of violence,” said Óscar Montes, 33, a civil engineer in Barranquilla who helped organize the marches on Facebook. “At this time the FARC can say whatever they want,” he said in a telephone interview. “But they will not have legitimacy.”

The FARC said over the weekend that it would hand over three more hostages to Mr. Chávez, citing the deteriorating health of the captives, former lawmakers who have been held for more than five years. No date was set for the release of the captives, Gloria Polanco, Luis Eladio Pérez and Órlando Beltrán.

The FARC lashed out at the marches and at Mr. Uribe in a statement Monday, claiming “inhuman intransigence” on his part had blocked efforts to achieve a prisoner exchange.

The Marxist-inspired FARC continues to hold more than 40 political hostages, including Ingrid Betancourt, a former presidential candidate, and three American military contractors captured when their plane crash-lnaded in the jungle in 2003. The guerrillas are also accused of holding 700 captives for ransom.

Support for the marches was not unanimous in Colombia. Relatives of some of the FARC’s captives opposed them, contending that they lowered chances for a release.

The FARC, one of the main actors in Colombia’s long internal war, finances itself through kidnapping and cocaine trafficking. A smaller rebel group, the National Liberation Army also carries out abductions for profit, largely along the long border with Venezuela.

Private militias, which battled both guerrilla groups for much of the 1990’s and well into this decade, have largely disbanded. But many of the combatants in the militias, which carried out their own kidnappings and massacres, have resurfaced in Mafia-like groups that profit from drug trafficking and extortion.

Mr. Chávez’s role in mediating Colombia’s conflict has come under increasing scrutiny here. At the march on Monday, people chanted, “Chávez guerrilla, the people are offended!” among other chants critical of Venezuela’s president.

A report in Semana, a leading news magazine, claimed this week that Hugo Carvajal, Mr. Chávez’s chief of military intelligence, provided logistical assistance and forged Venezuelan identity documents for FARC commanders. Mr. Chávez lashed out at the report Monday night, calling it an “attack against the revolution.”

Anti-FARC marches took place in Venezuela and other countries affected by the war throughout the Americas. In Lima, Peru, more than 800 people gathered in front of Congress. One demonstrator there was Jorge Santamaría, 56, who was kidnapped by the FARC in 1999 when he fled attacks by Shining Path guerrillas in Peru.

“I don’t think they killed me because I made it clear I am not afraid of death,” said Mr. Santamaría, abducted at Bogotá’s airport and held for eight months. “I convinced them I was no one important,” said Mr. Santamaría, who was working for a palm oil company in the Peruvian Amazon at the time.

One of the most poignant expressions against the FARC could be seen outside the United Nations headquarters in New York where hundreds of demonstrators gathered. Salvador Zapata, 37, a restaurant worker in Edgewater, N.J., held his thoughts high above his head, written in a bright blue poster.

“FARC stop this dirty and fractious war against the people,” read one line of his comments.

“They say that they represent the people,” said Mr. Zapata, who is from Caldas, Colombia. “This is a lie.”